Tinker, tailor

CRISES have a way of getting people to reassess tarnished ideas. The policy of fiscal stimulus languished in the intellectual wilderness until the financial meltdown of 2008-09 forced governments to start spending as a way of propping up aggregate demand. As rich countries struggle with an anaemic economic recovery, it is now the turn of industrial policy. The idea of government intervention to influence the composition of a country's output has long been derided by economists for breeding inefficiency, reducing competition, encouraging lobbying and saddling countries with factories producing products nobody wants. But in the aftermath of the crisis, industrial policy has gathered some vocal champions.

Justin Lin, the chief economist of the World Bank, believes that policies of this sort are a useful way for governments in developing countries to speed up structural transformation. Dani Rodrik of Harvard's Kennedy School of Government reckons that Chinese rules requiring a significant chunk of intermediate goods (ie, inputs used to make other goods) to be locally produced helped the growth of supplier industries. He also believes that export incentives aided Chinese companies in gaining a foothold in competitive global markets, and credits active industrial policy with much of China's recent success.